Publication:
The impact of delisting Shariah compliant stocks on Islamic investments
Abstract
Islamic investments as a critical component of the Halal supply chain received considerable attention in the global financial market when the Dow Jones Islamic market Index (DJIM) was established in 1999, followed by Financial Times Stock Exchange (FTSE), Standard and Poor (S&P) and others. Malaysia took global leadership in the construction of Shariah Indices in 1999 and launched the FTSE Bursa Malaysia Emas Shariah Index in 2007. One fundamental feature of the Shariah Indices is the screening process before the stock can be identified as Shariah compliant. The screening methodology differs to some degree among the major Shariah stock indices but essentially settle to affirm consensus on major issues especially those associated with qualitative screening such as the prohibition of riba, gambling and trading of prohibited commodities. Greater disparities of consensus were evident in the quantitative screening with differing stance on financial ratios bearing interest (riba) elements. Of most concern is the debt/total asset financial ratio in which conventional debt over total assets of the company must not exceed 33 percent, otherwise the firm will be delisted from the Shariah compliant list of companies. Companies can be included again in the list once corrections are made to comply with Shariah principles.
Keywords
Islamic investment , Shariah stock
Citation
Rosly, Saiful Azhar. (2018). The impact of delisting Shariah compliant stocks on Islamic investments. Wahed Invest, (February 2018). Retrieved from https://journal.wahedinvest.com/the-impact-of-delisting-shariah-compliant-stocks-on-islamic-investments/
Publisher
Wahed Invest